The storm before the storm?

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The storm before the storm?

Published 21 abril 2021

The ABI recently released its UK property claims data for the last quarter of 2020, revealing that gross claims for commercial and domestic properties amounted to £4,140m.

Among the key findings were that the value of claims reduced by £451m, compared with 2019, across fire & explosion, theft and escape of water perils. However, the weather-related perils increased by £437m, due to the storms that hit Q1 2020 - Brendan, Ciara, Dennis and Jorge. It must be noted that these figures exclude non-damage business interruption claims.

Do the statistics provide false comfort to property insurers for 2021?

Covid-19 has inevitably affected the type and value of domestic and commercial property claims, even if the rise of non-damage business interruption claims is not taken into account.

With more people working from home/on furlough, fires and escapes of water can be identified and stopped much earlier so the consequential damage may be less (although with more technology at home, the value of claims can still be high). Will a rise in the number of DIY projects underway at home lead to more water damage claims from unfortunate escapes of water? Does being at home for longer mean more time to notice defects in buildings such as subsidence or other underlying building issues, so leading to more notifications? 

A combination of Brexit and Covid-19 is likely to increase the lifecycles (and cost) of claims, if building materials and labour are more scarce and repairs cannot be carried out. This will increase the cost of alternative accommodation (domestic) and business interruption claims (commercial) as customers will be out of their properties for longer due to delays in commencing the repairs work and the properties taking longer to repair.

As financial pressure on both individuals and businesses grows, the number of fraudulent or exaggerated claims will rise, particularly relating to escapes of water and fire-related incidents.

More claims and longer claims lifecycles will add further pressure on the industry’s ability to service claims to their aspired standards. This will lead to leakage on several fronts such as paying claims that are not covered by the policy, not investigating as thoroughly for fraud and not identifying potential recoveries. This will compound the increase in the cost of claims, impacting insurers’ loss ratio even more. The perfect storm if you will….

DAC Beachcroft property experts

DAC Beachcroft has the largest property insurance team in the UK with over 300 lawyers. Our dedicated property team has supported insurers for decades, through our defined products with specialist peril specific fraud, coverage and recovery lawyers across the whole of the UK and globally. Our experience and expertise are supported by data demonstrating our market leading results. These show clear indemnity savings for our clients through our talented people and innovation. Among the latest innovations to be developed in our Innovations Lab is our new property tool, AIDan, that assists with the initial triage process of potential insurance recovery claims. Our overriding objective is always to work with our clients to deliver the solution that works best for them and their customer philosophies.

For further details please do not hesitate to contact Martin Holmes or Tom Watkinson.

Key Contacts

Martin Holmes

Martin Holmes

Bristol

+44 (0)117 918 2072

Thomas Watkinson

Thomas Watkinson

London - Walbrook

+44 (0)20 7894 6812

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